Forward looking approach to
fiscal sustainability generally seeks to assess the fiscal implication of
expected program specific expenditure in future. In this regard, the paper
attempts to assess the future fiscal implication of National Food Security
Act (NFSA), 2013 in India. The results, under baseline scenario based on
projected debt/GDP ratio shows modest increase in it till 2021-22, and then
declines towards the current level of 70% in 2012-13 and hence signify
fiscal sustainability. The dynamics of projected baseline debt/GDP ratio is
largely shaped by the provisions in the Act and underlying demographic
factors to be experienced by India during the projection horizon. The
sensitivity analysis under different assumptions about productivity growth,
interest rate on government borrowing and primary deficits/GDP ratio show
mixed results and hence provide necessary policy implication to restore
fiscal sustainability under the Act. Keeping the primary deficits/GDP ratio
below 1.5% by way of periodic upward revision of issue price of food grains,
as envisaged in the Act, coupled with higher productivity growth and lower
interest on government debt would ensure long-term fiscal sustainability of
the Act.